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New Report Says Maine Welfare Benefits Trump Working Wages

A new report published Aug. 19 by the Cato Institute has shed light on the extent of government dependence in Maine. In the Pine Tree State, an average family on welfare receives more than the yearly income for a minimum wage worker, and could potentially receive nearly twice that amount.

The report, titled “The Work versus Welfare Trade-Off: 2013,” reprises an analysis first done by the Cato Institute in 1995. Authors Michael D. Tanner and Charles Hughes created a hypothetical average welfare recipient family and research the total value of benefits such a family could reasonably be expected to receive in each of the 50 states.

The resulting data offers a startling truth—in the state of Maine, an average welfare family can expect to receive $19,871 in untaxed welfare benefits per annum. This figure exceeds the yearly income for a minimum wage worker by 27%, and is equivalent to 42.8% of the statewide median salary. These numbers mean that financial incentives exist for welfare recipients in Maine to avoid beginning a career in a minimum wage position.

Tanner and Hughes point out the problems with such generous welfare spending. “While poor people are not lazy, they are not stupid either,” writes Tanner in an online recap titled “Why Get off Welfare?” If private corporate positions available to welfare recipients require much more work and much less pay than remaining on welfare, those recipients then have incentives to remain on welfare. Simply put, any poor person with a head on their shoulders can see the economic rationale to remaining on welfare, and it shows in the numbers. “Less than 42 percent of welfare recipients are engaged in some form of work activity,” explain Tanner and Hughes. Considering that education, training, and even job searching all count as a “work activity,” the actual number of welfare recipients who are striving to exit welfare may be far lower.

Such a sweeping study necessarily includes generalizations and estimations. In their study, Tanner and Hughes carefully consider which benefits a typical welfare recipient would receive in order to create a model which most closely follows reality. As a result, Tanner and Hughes exclude housing assistance benefits, which in Maine reach $9,876 per annum. So-called “hard core” welfare recipients—those who make long-term use of their welfare benefits and are most likely to receive housing assistance—could, therefore, conceivably receive up to $29,747 in yearly welfare benefits, equivalent to 191% of yearly earnings at minimum wage or 92% of the statewide median salary. “It is undeniable,” state Tanner and Hughes in their conclusion, “that for many recipients—especially long-term dependents—welfare pays more than the type of entry-level job that a typical welfare recipient can expect to find.”

Maine’s welfare system thus creates perverse incentives for welfare recipients. Finding a job and starting a career is the surest and safest route out of poverty. But with Maine’s current levels of welfare, many rational parents will see the advantages to not finding a job, even if they would like one. Tanner and Hughes capture the paradox artfully: “By making a rational sort-term choice, recipients who forgo work for welfare may trap themselves and their families in long-term dependence.”